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Urban Development: Where the World Bank Leads, Sri Lanka Follows

Contrary to the claims of the present regime, its urban development agenda is neither autonomous nor a product of indigenous thinking, rather it follows the well trodden though hazardous path carved out by powerful global financial interests and institutions. In this article, we look at two World Bank reports -Turning Sri Lanka’s Urban Vision into Policy and Action (2012) and Sri Lanka: Reshaping Economic Geography Connecting People to Prosperity (2010) -to underline how the interests of the state and a major global financial institution converge in ways that may limit the space for political engagement and alternative views regarding the unequal effects of the policies they advocate.

According to the Bank’s reports, policy measures must focus on removing restrictions on land markets and promoting financing of low-income housing, identifying and solidifying the economic functions associated with different regional centers across the country, and address inefficiencies in "overlapping functions" of government bureaucracy by streamlining local government, especially in Colombo. We question these prescriptions not only because they are not grounded in a sound analysis of economic and spatial inequalities in Sri Lanka but also because they promote a convergence of state and market interests in ways that are politically problematic.

Misplaced stress on ‘freeing’ urban land and market instruments

The World Bank sees land market restrictions as a major impediment to urban development. In, Reshaping Economic Geography, the World Bank argues that the Land Development Ordinance (LDO) of 1935, preventing sale of state owned land given for various purposes, along with restrictive tenancy laws inhibit market "diversification." What this means in practical terms, however, is unclear. It also argues that by removing slums and providing clear title to the land and loans in new settlements, people will be able to buy and sell freely. What such a shift ignores is the class character of those who will benefit from an allegedly freer market.

The Bank papers over these issues, arguing that the resulting "beautification" of Colombo coupled with a boost in private land development will automatically benefit everyone. The stress in the Mahinda Chintana on improving "underserved settlements in the city of Colombo through private developers and liberate prime lands for commercial activities" already echoes this.As argued in our previous column, major investments in Colombo are geared towards enhancing its appeal as a destination for global tourism and capital rather than challenging urban inequalities.

The Bank’s Urban Vision report argues that existing banking agencies have focused too much on "commercially viable groups," to the neglect of the poor and calls for expanding private housing finance to low-income households. Clear titles and secure tenure, a pre-requisite for such financing, are thus no longer entitlements but pathways to enhancing"bankability". Moreover, what such financial inclusion means in the context of broader socio-economic and political exclusion and dispossession, which result in poverty and low incomes in the first place, remains unexplored. The Bank also calls for the promotion of a private mortgage-default insurance market but the pitfalls of such financialisation in a broader economic context geared toward financial speculation in urban land are not addressed.

Beyond questioning the tensions papered over and issues ignored in the reports, we also want to emphasize those areas in which the World Bank appears to contradict itself by arguing that land market restrictions and state-owned land are severe issues for urban development. The Bank acknowledges that the Colombo Metropolitan Region contains only 10-20% of such land. Moreover, the LDO affects less than 2% of Colombo’s population.Finally, the Bank notes that rural commuters and migrant laborers in particular are unaffected by current land market restrictions such as the LDO. For example, according to the Bank, Colombo currently has about 400-500,000 commuters. Thus its misplaced emphasis on cutting land restrictions,signals the underlying project at work in the Bank’s reports on urbanisation.

Spatially apolitical, historically blind

On a national level, attention is paid more generally to linking together the economic functions of different regions. Following the National Physical Plan, the Bank identifies cities in five metro regions (Colombo, North-Central, Southern, Eastern, and Northern) and nine metro cities (Ampara, Anuradhapura, Batticaloa, Colombo, Dambulla, Hambantota, Jaffna, Polonnaruwa, and Trincomalee). Reshaping Economic Geography focuses on the concentration of 50% of GDP in the Western Province with the regional primacy in manufacturing.

The World Bank report argues that in spite of the apparent imbalance indicated by these statistics, the government should promote"spatially blind" approaches that increase national welfare in order to encourage migration "by choice." The report recognizes that these approaches will not lead to actual economic transformation of the regions by redistributing industry. As the Bank puts it, instead of relocating industry and manufacturing to ease regional imbalances, the government ought to "identify what investors perceive as opportunities and constraints" for each specific region.

What this approach ignores however is precisely why different regions are associated with different economic functions in the first place. Given the historical importance of global capital in directing Sri Lanka’s economy, first through the impact of tea plantations in the Central Province in colonial times to the emphasis on Free Trade Zones in Western Province since the late 1970s, it’s telling that the Bank doesn’t "operationalise" factors involving uneven development in its report. Excluding this basic reality means that the report ends up legitimating existing regional imbalances along with Sri Lanka’s position as a dependent export-oriented economy.

More pertinent to the current political situation, the report renders invisible the effects of war on the North and East, translating the grave consequences to trauma-affected and displaced communities into a question of access to markets. Because of facts of "ethnolinguistic or religious heterogeneity," which remain unproblematised, the Bank argues that the state should administer "spatially targeted" policies to improve access. As the report puts it, "Language, ethnicity, or religion may divide one part of a country from another, effectively reducing market forces of migration and interregional trade".

This contorted description of the situation in war-affected areas completely ignores not only the flow of displaced persons but also the different spaces in terms of political access and power that have been carved out in the North and East by the LTTE and militarisation by the state. Moreover, it reinforces the government’s position that the current political issues can be reduced to that of "development" while negating the deeper political roots of the conflict.

Putting market ‘efficiency’ over deepening democracy

To touch on our last theme, the Bank’s report on urban policy, in particular, concentrates on the overlapping regulatory functions of existing government institutions. It provides a brief history of the creation of the National Housing Development Authority, Urban Development Authority, and other important institutions pertaining to urban development with liberalisation under the Jayawardene regime after 1977. It then asks how these institutions have currently been reconfigured through the amalgamation of the Ministry of Defense and Urban Development. This narrative however ignores questions of political access, such as attempts to sideline local government, particularly the municipal councils, in current urban development projects, particularly in Colombo. Instead the report calls simply for increased efficiency.

While the Bank doesn’t explicitly state its preference for the current political and administrative setup, arguing that current government hierarchy is indeed both "centralised and fragmented," the language used in its report on urban policy seems to effectively disable broader questions of political engagement. With people affected by major economic transformations such as insertion of the urban poor into speculative real estate markets, and implementation of regional development projects that seem to reinforce uneven patterns of development, urbanisation policies promoted by the World Bank and the regime will have serious political and economic consequences especially for poorer sections of society.